DOW tumbled sharply overnight, shedding -530 points or -1.35%, marking its most pronounced session drop since March 2023 and its fourth consecutive day of losses. This sharp decline seems a natural reaction after the index’s robust bullish run since last November, which propelled it to new record highs, lost steam. It’s also a logical area for some profit-taking and consolidations, just ahead of 40k psychological level.
The strong rally was largely fueled by anticipations of forthcoming interest rate cuts, even with delays. Nevertheless, there is little, but growing skepticism among investors on whether the policy easing cycle would really start this year. The recent surge in commodity prices has also served as a stark reminder of the challenges in curbing inflation.
The selloff also come just ahead of the crucial non-farm payroll report from the US today. Markets are expecting 205k job growth in March. Unemployment rate is expected to be unchanged at 3.9% while average hourly earnings are expected to rise 0.3% mom. Any upside surprises in today’s report, in particular wages growth, could prompt further shift in Fed expectations, and hut overall risk sentiment in the stock markets.
Technically, considering bearish divergence condition in D MACD, 39899.05 could be a medium term top in DOW already, just ahead of 40k psychological level, and 61.8% projection of 18213.65 to 35962.65 from 28660.94 at 40241.64.
Decisive break of 38483.23 support should confirm this bearish case, and bring deeper correction back to 38.2% retracement of 32327.20 to 39889.05 at 37000.42.
Nevertheless, strong rebound from the current level would push DOW for another take on 40k before topping.
Eurozone Sentix confidence rises to -5.9, yet momentum remains tepid
Eurozone Sentix Investor Confidence index surged from -10.5 to -5.9 in April, surpassing expectations of -8.3. This marks the sixth consecutive increase, reaching its highest since February 2022. Similarly, Current Situation Index climbed from -18.5 to -16.3, reflecting the highest point since June 2023 after six successive rises. Additionally, Expectations Index rose from -2.3 to 5.0, recording its seventh straight increase and the highest level since February 2022.
Sentix’s analysis suggests that despite the positive direction of economic momentum, the pace remains subdued. This sluggishness is attributed largely to the ongoing relative weakness of the German economy.
While the incremental economic improvement is a positive sign, it simultaneously tempers expectations for inflation reduction and subsequent central bank interest rate cuts.
Investors maintain anticipation for a more accommodative monetary policy stance within the Eurozone. Nevertheless, should the global economy sees a significant upturn, these aspirations for interest rate reductions may not materialize as expected.
Full Eurozone Sentix release here.